IBM MSP Business Spin-Off: Some Financial Details Released
IBM claims the MSP spin-off (aka NewCo) will be the "world's leading managed infrastructure services provider." That business unit, which will become a public held company, has more than 4,600 customers in 115 countries, including more than 75% of the Fortune 100, a backlog of $60 billion, and "more than twice the scale of its nearest competitor," IBM asserts.IBM did not disclose the spin-off's current or anticipated MSP revenues or expected business valuation. The NewCo spin-off is expected to be completed by the end of 2021, the company said.Although the standalone MSP will likely be a massive business, the spin-off may face growth challenges. The anecdotal evidence: In Q2, IBM Global Technology Services revenue dropped 8 percent to $6.32 billion due to declines in the company's application management and consulting business. At the time, IBM did not say what percentage of the global services decline specifically involved the MSP business.IBM Hybrid Cloud Strategy and Red Hat OpenShift
After the spin-off, IBM's own revenues will largely shift from managed IT services toward cloud software and services. Among the key financial anecdotes to note:- Ahead of the spin-off, more than half of IBM's revenues came from IT services, the company says.
- After the spin-off, a majority of IBM's revenues will come from cloud software and solutions, and more than 50 percent of IBM's revenues will be recurring, the company says.
IBM MSP Spin-Off: CEO and Chairman Perspectives
In a prepared statement about the spin-off and IBM's own hybrid cloud focus, CEO Arvind Krishna said:"IBM is laser-focused on the $1 trillion hybrid cloud opportunity. Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world's most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders."
"We have positioned IBM for the new era of hybrid cloud. Our multi-year transformation created the foundation for the open hybrid cloud platform, which we then accelerated with the acquisition of Red Hat. At the same time, our managed infrastructure services business has established itself as the industry leader, with unrivaled expertise in complex and mission-critical infrastructure work. As two independent companies, IBM and NewCo will capitalize on their respective strengths. IBM will accelerate clients' digital transformation journeys, and NewCo will accelerate clients' infrastructure modernization efforts. This focus will result in greater value, increased innovation, and faster execution for our clients."
